[00:00:04] Speaker 02: and whenever you're ready, counsel. [00:00:05] Speaker 03: Thank you, Your Honors. [00:00:06] Speaker 03: May it please the court. [00:00:08] Speaker 03: My name is Adam Unikowski and I'm here on behalf of the plaintiff 29 Palms Band of Mission Indians. [00:00:14] Speaker 03: ATF's decision to place 29 Palms on the PAC-TAC noncompliant list was contrary to law. [00:00:21] Speaker 03: ATF's decision hinged on its determination that 29 Palms [00:00:26] Speaker 03: Native Nation customers were acting unlawfully, which in light reflected ATF's determination that those customers were required to obtain licenses. [00:00:35] Speaker 03: That decision was incorrect because under federal Indian law, the Native Nation customers were not required to obtain licenses because those licensing requirements are preempted. [00:00:48] Speaker 03: Federal Indian law provides that a state generally cannot exercise regulatory authority over Native Americans on reservation operations unless a federal statute explicitly authorizes that exercise of authority. [00:01:00] Speaker 01: I thought the problem here was basically the sale of non-tax cigarettes to non-Indian customers, which may be occurring on the reservation. [00:01:11] Speaker 01: So is your position that the state has no authority to regulate those sales? [00:01:18] Speaker 03: Your Honor, in many cases under Brackard, the state is permitted to impose a tax on a non-Indian who buys cigarettes on an Indian reservation. [00:01:26] Speaker 01: I mean, the problem here is we've got a tribe of, what, 15 members, and they're dealing in millions of cigarettes. [00:01:33] Speaker 01: I mean, they can't be puffing them 24 hours a day, seven days a week. [00:01:38] Speaker 01: So they're clearly making sales to non-tribal members based simply on the volume of cigarettes that we're talking about. [00:01:48] Speaker 01: So we're a wholesaler, we sell to Native nations, and those are the retailers, and they in turn sell to... But the statute says that if the wholesaler that you're distributing to is subject to regulation because they are distributing to non-Indian customers, then they become customers under the statute, therefore requiring [00:02:13] Speaker 03: licensing from the state of California isn't that the regulatory scheme yes so the question under the regulatory scheme is whether the native nation customers are acting unlawfully so the native nation customers are all retailers operating on reservations their tribal retailers operating businesses on their own reservations [00:02:31] Speaker 03: So the question is whether the state of California can require those on-reservation retailers to obtain licenses as a condition of operating those on- But haven't we already resolved that issue in existing Ninth Circuit authority? [00:02:46] Speaker 03: No, we're not aware of any court in this jurisdiction or any other that's ever held that a state can require an on-reservation tribal business to obtain a license. [00:02:56] Speaker 01: So we would have to expand our decision in Big Sandy to clarify the law in this area, is that right? [00:03:03] Speaker 03: Yes, I think that a decision in ATF's favor here would be a significant expansion of Big Sandy because Big Sandy quite [00:03:09] Speaker 03: explicitly rests on the fact that Big Sandy was venturing off its reservation and a different legal framework applies when a tribal business is leaving its reservation to do business. [00:03:18] Speaker 01: But there are sales that are being made to other reservations in California and we have said that those sales are not sales that are being made on the reservation of the particular tribe at issue. [00:03:33] Speaker 01: They're sales outside of quote unquote Indian country. [00:03:36] Speaker 03: Absolutely, Your Honor. [00:03:36] Speaker 03: That is the holding of Big Sandy. [00:03:38] Speaker 03: That's absolutely correct. [00:03:39] Speaker 03: Yeah. [00:03:39] Speaker 03: But in this case, excuse me there. [00:03:41] Speaker 01: If those sales can be regulated, why should the next logical step not be the regulation of the sales of untaxed cigarettes to non-Indian customers, even though they happen to be made at a tribal smoke shop on the 29 Palms Reservation? [00:03:59] Speaker 01: Well, because the Supreme Court's decisions have sharply distinguished between state regulation of off-reservation and on-reservation operations because of the- If it involves members of your tribe, I would agree with you, but I don't think the Supreme Court has said you can't regulate transactions with non-tribal members on the reservation. [00:04:21] Speaker 03: So the Supreme Court has said that any state regulation of the tribe itself on its reservation can't be regulated, subject to this exception in the Moe case I'll talk about in a moment. [00:04:30] Speaker 03: It's true that under the Brackner case, the Supreme Court has held that when the state wants to regulate what a non-Indian does while on a reservation, that's subject to this balancing test of federal, state, and tribal interests. [00:04:43] Speaker 01: which is the purchase of untaxed cigarettes. [00:04:46] Speaker 03: Right. [00:04:47] Speaker 03: But here, the question is not whether the state of California may require the non-Indians to pay taxes. [00:04:53] Speaker 01: The question is whether it may force the tribal business to obtain a license as a precondition of conducting its own on- So does your client have no objection to collecting, charging and collecting the tax and remitting it to the state? [00:05:08] Speaker 03: If there was a way to do that without the licensing scheme, we'd have no objection. [00:05:11] Speaker 03: So many states have schemes where the on-reservation retailers don't have to get licenses, but they still are subject to collect and remit requirements. [00:05:19] Speaker 03: The Supreme Court has upheld those schemes, and we're fine with that. [00:05:23] Speaker 03: I mean, in cases such as the Moe case, the wellspring of this entire line of cases, the federal district court in that case invalidated Montana's licensing requirement, and that was not appealed. [00:05:33] Speaker 03: But the Supreme Court ultimately held that in the absence of that licensing requirement, the state may impose the requirement to collect and transmit the tax. [00:05:41] Speaker 03: We quote another case from the Oklahoma Supreme Court, which is virtually identical to that. [00:05:46] Speaker 03: The court says that it's perfectly fine for the state to direct the tribe to collect and remit the tax dollars. [00:05:52] Speaker 01: So what's the current status on the ground here at 29 Palms? [00:05:55] Speaker 01: Are they continuing to sell retail? [00:05:58] Speaker 01: No. [00:05:59] Speaker 01: We're on the PAC-TAC non-compliant list, which means common carriers. [00:06:02] Speaker 03: Correct. [00:06:03] Speaker 01: Common carriers cannot carry it, so no, I mean... And before that happened, how did the tribe's customers place their orders? [00:06:10] Speaker 01: How did they place through online over the phone through the mail? [00:06:17] Speaker 03: I think it was mostly and you know online I'm not I'm not sure much of the record has information of whether it was over the phone I mean we have a lot of different customers. [00:06:23] Speaker 03: We have something like 40 different customers There's a listing of them in the Joint Appendix pages er 66 to 67 me to be a lot of other tribes in California [00:06:33] Speaker 03: Exclusively, we only solely sell to other tribes which operate businesses on their own reservations. [00:06:39] Speaker 01: But doesn't 29 Palms have retail or at least retail sales through its casino? [00:06:44] Speaker 03: Yes, so 29 Palms has its own retail business, which I'm including the list of tribes operating on reservation businesses. [00:06:51] Speaker 01: So it does operate at least one retail business selling to non-tribal members on the reservation? [00:07:00] Speaker 03: Yes, 29 Palms has such a business, and it also sells to other tribal businesses. [00:07:05] Speaker 03: But the stakes change when the state is regulating off-reservation versus on-reservation transactions. [00:07:10] Speaker 03: I mean, the MOE case requires that the burden be genuinely minimal, and the burden in this case of licensing is both unprecedented and significantly greater than the types of burdens this... Well, but the licensing, as I understand it, requires filling out an application and paying a fee. [00:07:27] Speaker 01: The burden really is the assessment of the tax, the excise tax, collecting it. [00:07:34] Speaker 01: I assume it's what, $2.45 a carton or something, as I read the record. [00:07:40] Speaker 03: So there's three aspects of the licensing requirement that we take issue with, which go well beyond from our perspective, the mere collection and transmission of tax. [00:07:48] Speaker 03: One is just the fact that you need a license at all as a precondition to operating. [00:07:51] Speaker 01: Okay, but other than filling out an application and writing a check for, I don't know what the licensing fee is, let's assume it's $1,000. [00:07:59] Speaker 01: Other than writing that, how burdensome is it? [00:08:03] Speaker 03: Well, okay, I mean, I don't want to trivialize those two burdens, but I can jump to the third point I was going to make, which is the fact that the tribe has to subject itself to mandatory inspections. [00:08:12] Speaker 03: I think there's a significant sovereignty issue there. [00:08:14] Speaker 01: Well, if your client doesn't have any problem collecting and remitting the excise tax, [00:08:22] Speaker 01: Doesn't the state have a right to audit the records to make sure that they're collecting all the tax on all the cigarette sales to non-tribal members? [00:08:31] Speaker 01: I don't think, first of all, of course, it's not just our clients, all of our Native Nation customers that are at issue in this case, and I think there's- If I disagree with your assessment and conclude that the sales to other tribes is not a sale in Indian country vis-a-vis 29 Paul, [00:08:49] Speaker 01: then those are prohibited sales under the regulatory scheme. [00:08:53] Speaker 03: That's not correct, Your Honor. [00:08:54] Speaker 03: Under the PACT Act, the premise of this decision was that the tribe is a delivery seller. [00:09:00] Speaker 03: And that rested on the determination that the buyers are consumers. [00:09:05] Speaker 03: Right. [00:09:05] Speaker 03: And that can only be true if the buyers are acting unlawfully, not us. [00:09:08] Speaker 01: But my suggestion is it seems to me the regulatory scheme, and I think our case law says, that if they are selling cigarettes to another tribe, [00:09:18] Speaker 01: and that tribe is selling the cigarettes to non-tribal members, then they become a customer within the meaning of the regulations. [00:09:28] Speaker 01: And therefore, 29 Palms can't sell to another Indian tribe if that tribe is a customer under the Act. [00:09:34] Speaker 03: Well, I mean, in a sense, that's a question. [00:09:36] Speaker 03: The question is whether the... Under the relevant regulations, the Native Nation customers are consumers only if [00:09:44] Speaker 03: they're acting unlawfully. [00:09:46] Speaker 03: So I think both sides agree in this case that ATF's decision hinge on the determination that the on-reservation retailers were violating California law for not getting licenses. [00:09:56] Speaker 03: So even if the court thinks, I mean we don't agree, but even if the court thinks that 29 Palms was doing something wrong, that's not enough to uphold ATF's decision. [00:10:03] Speaker 03: The court has to also find that the on-reservation retailers were required to obtain licenses with all that entails as a precondition to operating their own tribal businesses. [00:10:19] Speaker 03: Yes, and we would have no problem with the state requiring, under numerous different mechanisms, the tribes to collect those taxes and transmit them, to the extent Bracker didn't preempt the tax. [00:10:28] Speaker 01: There's a Supreme Court case called- So is there any other burden that you're complaining about? [00:10:33] Speaker 01: We've got the licensing, we've got the sales to other distributors. [00:10:37] Speaker 01: Was there a third problem? [00:10:38] Speaker 03: Yeah, so the burdens we're talking about, Your Honor, are the burdens that affect the on-reservation retailer, not the burdens on 29 poems. [00:10:45] Speaker 03: Those are the burdens that we're talking about. [00:10:46] Speaker 03: Because what we're arguing in this case primarily [00:10:49] Speaker 03: is that the state cannot require on-reservation retailers to obtain licenses as a precondition to operating their businesses. [00:10:55] Speaker 01: That's because they don't want to be subject to inspections, audits, and reporting. [00:10:59] Speaker 03: First of all, I think it's a significant infringement on Indian sovereignty to require a tribe to obtain a license as a precondition to operating a business on its own sovereign territory that's never been blessed by the Supreme Court except in the Rice case [00:11:11] Speaker 03: involving alcohol, which is the exception that proves the rule, because there's a federal statute explicitly authorizing states to impose licensing requirements. [00:11:19] Speaker 01: That's one. [00:11:19] Speaker 01: The PACT Act itself is a federal statute, is it not? [00:11:22] Speaker 03: Yes, but the PACT Act explicitly provides that it was not intended to expand state regulatory authority over Indian reservations. [00:11:29] Speaker 03: It's completely opposite to the federal regime governing alcohol sales. [00:11:33] Speaker 01: So your position is under the PACT Act that the state is powerless to regulate [00:11:39] Speaker 01: the conduct of 29 palms on its reservation, regardless of who's buying their cigarettes. [00:11:44] Speaker 03: That is emphatically not our position, Your Honor. [00:11:46] Speaker 03: The state has numerous mechanisms, just not this one. [00:11:48] Speaker 03: Virtually every state has managed to find a way to collect these taxes without imposing licensing requirements on reservation businesses. [00:11:56] Speaker 03: The Potawatomi case, for example, from the Supreme Court identifies lots of ways that states can collect every single tax dollar in full compliance with federal Indian law. [00:12:04] Speaker 03: California is unique in requiring this licensing requirement of on-reservation materials. [00:12:16] Speaker 02: That the problem here is the mechanism, not the idea, I guess is what I'm saying. [00:12:21] Speaker 03: That's exactly right, Your Honor. [00:12:22] Speaker 03: The problem is the mechanism. [00:12:23] Speaker 03: Most states don't have, in fact, I don't think any other state has this type of rule, like California. [00:12:27] Speaker 03: And in terms of working with California, California withdrew its nomination of 29 palms to the PAC-DAC noncompliance list, and yet the ATF proceeded forward. [00:12:35] Speaker 02: So that's what I'm wondering is that, this is a little bit outside of the briefing here, but, and I don't know if you're willing to, if you're authorized to even talk about this, but it seems to me you have, in this case, very good counsel, [00:12:46] Speaker 02: You have three different sovereigns, and it seems to me this case should be resolved around a table with a mediator rather than in this context, candidly. [00:12:55] Speaker 02: I mean, you know, if we got to make the call, we got to make the call. [00:12:59] Speaker 02: But it seems like with the counsel we have here and the money involved, something could be worked out. [00:13:04] Speaker 02: I'm curious if you're authorized to talk about whether if we instructed you guys to go to mediation and whether you think that would be fruitful. [00:13:10] Speaker 03: I'd like to check with our client first, but I'm confident about that because we had government to government negotiations with California after we were nominated. [00:13:17] Speaker 03: So what happened was California nominated us. [00:13:20] Speaker 03: We didn't find out about that until a bit later. [00:13:22] Speaker 03: And then California had some concerns about the fact that we weren't submitting PACTAC reports to the state. [00:13:26] Speaker 03: We work with them, and then we started submitting them, and then California withdrew the nomination, and then ATF nonetheless proceeded forward. [00:13:33] Speaker 03: So, you know, we're always happy to work with California and potentially with other tribes to try to achieve a reasonable solution. [00:13:38] Speaker 03: I mean, obviously, we think there's a federal preemption problem here, but, I mean, I'll get back to the court, but, I mean, the tribe is always open to reasonable government-to-government negotiations with the fellow sovereigns who have a stake in this issue. [00:13:50] Speaker 02: Do you want to reserve? [00:13:52] Speaker 03: Oh, yeah, I'll reserve the middle of my time. [00:13:54] Speaker 02: And we were a hot bench, so we'll give you three minutes. [00:13:55] Speaker 02: Thank you. [00:14:08] Speaker 00: Good morning, may I please the court, Laura Myron for ATF. [00:14:11] Speaker 00: I'd like to make three points that I think might help to clarify some confusion. [00:14:14] Speaker 00: The first, with respect to 29 Palms's liability under the statute and its relation to the licensing on reservation retailers. [00:14:23] Speaker 00: The second, with respect to the application of Big Sandy, as it relates to this case, and the third, I'd like to address the bonding and licensing requirements that counsel referenced at the podium. [00:14:33] Speaker 00: So if I could start with the liability question. [00:14:36] Speaker 00: I think this is important. [00:14:37] Speaker 00: 29 Palms' liability under the PACT Act turns only on its own violations of California state law, its own failure to have a license as a distributor, its own sales of millions of cigarettes to various customers without paying the excise tax. [00:14:52] Speaker 00: 29 Palms is effectively raising at a jurisdictional defense to ATF's application of the statute that their sales are not the kind of sales, not delivery sales, within the meaning of the statute. [00:15:04] Speaker 00: And the reason that they're pointing to that, and they're basically asking this court to hold that [00:15:09] Speaker 00: notwithstanding the fact that the on-reservation retailers are not licensed and are not paying the taxes, that they are nonetheless operating lawfully, and therefore the sales are outside of ATF's enforcement reach. [00:15:21] Speaker 00: That would require this Court to conclude that it would be an infringement of tribal sovereignty for the on-reservation retailers to [00:15:30] Speaker 00: be required to get a license and to pay the excise taxes. [00:15:34] Speaker 00: But 29 Palms's own liability under the statute does not turn on the status of its online retailers. [00:15:41] Speaker 00: That's effectively an argument that the reach of the statute wouldn't reach those kinds of sales. [00:15:49] Speaker 00: And I think that leads to Big Sandy, which is this court's [00:15:53] Speaker 00: sort of closest precedent, the factual setup of Big Sandy is materially identical to the factual setup you have before you. [00:16:00] Speaker 00: A tribal retailer making sales to other tribes operating on reservation cigarette sales through smoke shops and other things to the general public to non-tribal members. [00:16:14] Speaker 00: And the question before the court in that case was whether the very same licensing, record keeping, and excise tax scheme that is before you today [00:16:22] Speaker 00: could lawfully be applied to the distributor, and this court said yes. [00:16:27] Speaker 00: And in doing so, it made two, I think, important points. [00:16:31] Speaker 00: The first is the court said, and this is on page 725 and 726 of the opinion, that the test for application of state regulatory burdens to on-reservation conduct is whether or not it's a minimal burden using the tests derived from cases like Moe and Milhelm and those cases. [00:16:51] Speaker 00: The court then said, [00:16:53] Speaker 00: that the very licensing scheme that you have before you today as applied to distributors was the kind of minimal burden that could facilitate the collection of a conceitedly lawful excise tax. [00:17:03] Speaker 00: And so it is true that Big Sandy doesn't directly answer the question before you today whether that licensing scheme as applied to an on-reservation retailer would be a minimal burden. [00:17:14] Speaker 00: But I think that if you read Big Sandy, it gives you guidance that says one, the test is minimal burden and two, [00:17:21] Speaker 00: This licensing scheme is the kind of minimal burden that facilitates the collection of a valid excise tax. [00:17:26] Speaker 01: I would... Can you answer my question that your opposing counsel didn't have an answer for, and that was what did the ATF investigation show in terms of how orders were placed? [00:17:40] Speaker 00: There has been no dispute that these are remote orders. [00:17:42] Speaker 00: I don't know whether they're made by phone or online. [00:17:46] Speaker 01: Remote order, what does that mean? [00:17:47] Speaker 00: Not an in-person sale. [00:17:49] Speaker 00: So not someone going into a cigarette retailer and buying a pack of cigarettes. [00:17:53] Speaker 00: I mean, this is a distribution scheme. [00:17:55] Speaker 00: So these are significant sales. [00:17:57] Speaker 00: 29 Palms is importing millions of cigarettes from New York and selling them to the, I think, 40-plus retailers, as noted. [00:18:04] Speaker 01: So they're being made in some sort of an electronic form, whether it's online or through email. [00:18:11] Speaker 00: Section 376A of the PACT Act, the sort of kinds of sales that bring you within the realm of ATF's enforcement authority, require one, that it be a remote sale, and two, that it be to a consumer. [00:18:24] Speaker 00: And this is on A1 of our appendix. [00:18:27] Speaker 00: And there's no dispute that they satisfy the remote sales component of that jurisdictional requirement. [00:18:34] Speaker 00: The question in this case, and the argument they're making, is that ATF doesn't have enforcement authority over these sales. [00:18:41] Speaker 00: because they are retailers that are lawfully operating in the state of California. [00:18:45] Speaker 00: And so they are asking you to hold that imposing the licensing, record keeping, and excise tax requirements on those retailers would be an infringement of tribal sovereignty. [00:18:55] Speaker 00: And they have to be correct that they are nonetheless operating lawfully, notwithstanding the fact that the record establishes that they don't have [00:19:06] Speaker 00: the requisite licenses and they haven't paid the tax. [00:19:09] Speaker 00: And they would have to do that for all of the retailers that are included in the administrative record demonstrating that 29 Palms is making the kind of sales that brings them within the reach of ATF's enforcement authority. [00:19:22] Speaker 01: When you say making the kind of sales, you mean sale of untaxed cigarettes to non-Indian consumers. [00:19:28] Speaker 00: I mean delivery sales of cigarettes, which is a sale of cigarettes or tobacco products that is conducted remotely and that is not to a lawfully operating retailer. [00:19:39] Speaker 00: If those two conditions are met, then ATF has enforcement authority where that defendant is not paying the excise taxes, is not complying with licensing requirements, and it has the authority to place them on the noncompliant list until they come into compliance with state [00:19:58] Speaker 00: tobacco laws. [00:19:59] Speaker 00: And so there are sort of two questions with respect to ATF's enforcement authority. [00:20:04] Speaker 00: The first is whether it is the kind of sales that bring you within the reach of ATF's authority. [00:20:09] Speaker 00: And the second is whether you are complying with state law or otherwise in violation of state law, which would give ATF authority to put you on the noncompliant list. [00:20:19] Speaker 00: They have not contested the second part of that. [00:20:22] Speaker 00: They have not contested that they are not in compliance with California state law. [00:20:26] Speaker 00: And Big Sandy, in Big Sandy, [00:20:28] Speaker 00: this court held that those licensing, record keeping, and excise tax requirements can lawfully be applied to a distributor in the same position as 29 Palms. [00:20:38] Speaker 00: So I don't think there is a valid argument that it would be lawful for them to nonetheless make these sales. [00:20:43] Speaker 01: Well, their argument is sovereignty, right? [00:20:45] Speaker 01: You don't have the authority to regulate what we do on our reservation. [00:20:49] Speaker 00: Their argument is that they're making sales to lawfully operating retailers because the state does not have the authority [00:20:56] Speaker 00: to regulate the retailers in the way that it does the distributors, which this court blessed in 29 palms. [00:21:02] Speaker 00: So they're effectively saying that because the retailers operate on the reservation, that that shifts the calculus, shifts the burden such that the test this court applied in 29 palms would come, excuse me, in Big Sandy, would come out differently with respect to on-reservation retailers. [00:21:20] Speaker 00: But I would point the court, [00:21:21] Speaker 00: to the Supreme Court's decision in Millhelm, in which the Supreme Court said that states have a valid interest in collecting cigarette taxes on reservations and that there is more room for state regulation in that area. [00:21:37] Speaker 00: I would also point the court to Colville, in which the Supreme Court held that reasonable regulatory burden. [00:21:43] Speaker 00: Thank you, Your Honor. [00:21:44] Speaker 01: I appreciate it. [00:21:48] Speaker 00: I'm not a not a Kansas City where I'm from that I'm familiar with. [00:21:53] Speaker 00: But in that case, what the Supreme Court said is that states may apply reasonable regulatory burdens designed to facilitate the collection of that conceivably valid taxes. [00:22:06] Speaker 00: This is a conceivably valid tax and the licensing requirement is [00:22:10] Speaker 00: as this court found in Big Sandy, the kind of minimal burden that facilitates its collection. [00:22:14] Speaker 00: And then I would like to address very briefly, if I could, the specific requirements of the licensing scheme, particularly the bonding and inspection requirements and the fee. [00:22:23] Speaker 00: California does not require tribal retailers or distributors to pay the fee. [00:22:29] Speaker 00: There's a waiver by regulation. [00:22:31] Speaker 00: There's a waiver provision that followed the Supreme Court's decision in Moe in which the court found that that particular fee would infringe on tribal sovereignty. [00:22:41] Speaker 00: But it does require them to get a license. [00:22:44] Speaker 00: And that licensing requirement, and I think this is also important, does not come [00:22:49] Speaker 00: with the inspection and bonding requirements that plaintiffs have suggested that it comes with. [00:22:53] Speaker 00: The bonding requirements in the state licensing scheme apply only to importers and manufacturers, which the on-reservation retailers are not. [00:23:03] Speaker 00: There would be holding a distributor or retailer license, which doesn't have bonding requirements. [00:23:09] Speaker 00: And the inspection requirements, which are in California state law 22980, are not contingent on your status as a licensee. [00:23:17] Speaker 00: The state, in that provision, authorizes its agents to inspect any facility where cigarettes are being sold or where they suspect cigarettes are being sold in violation of California state law. [00:23:30] Speaker 00: Applying for a license does not require the applicant to consent to inspection in any way. [00:23:35] Speaker 00: And whether or not those inspection requirements would otherwise infringe on tribal sovereignty isn't part of this case, because what is at issue in this case is the failure of the on-reservation retailers to have a license, which doesn't sort of bring with it the inspection requirements that are pointed to. [00:23:55] Speaker 00: California's amicus brief they have explained that that's a separate part of the Overall tobacco taxing and licensing scheme that does isn't contingent on the license application If the court has well, let me ask you the question. [00:24:09] Speaker 02: I ask opposing counsel again Very good counsel in this case a lot of money at stake three separate sovereigns What are your thoughts about? [00:24:19] Speaker 02: Us have send you to one of our mediators and try to work this case out instead of us working it out [00:24:25] Speaker 00: We're always happy to participate in mediation. [00:24:27] Speaker 00: California isn't a party to this case. [00:24:29] Speaker 00: I frankly haven't spoken with them about their interests. [00:24:36] Speaker 00: I will say 29 problems is not complying with California state law and they haven't contested that they're not complying with California state law. [00:24:44] Speaker 00: Their argument is that they don't have to because [00:24:48] Speaker 00: the online retailers cannot be asked to get a license, the exact license that this court blessed in Big Sandy. [00:24:55] Speaker 00: And so we're always happy to participate in mediation. [00:24:58] Speaker 00: But I don't think this is a particularly hard legal question before the court. [00:25:02] Speaker 00: And we would ask you to apply the test that you applied in Big Sandy and reach the conclusion that [00:25:07] Speaker 00: is effectively noted throughout the decision that this is the kind of minimal burden for on reservation retailers who are also not a party to this case. [00:25:18] Speaker 00: And the reason, I think that sort of brings me back to my original point, which is the reason that this is relevant is because 29 Palms is effectively asserting an affirmative defense. [00:25:27] Speaker 00: And so in order for them to prevail before this court, they have to be right. [00:25:31] Speaker 00: that all of the on-reservation retailers to whom they're selling cigarettes are lawfully operating, notwithstanding the fact that they're not licensed, notwithstanding the fact that they're not paying excise taxes, notwithstanding the fact that they're buying cigarettes from an unlicensed distributor, which is also a violation of California's licensing provisions. [00:25:48] Speaker 00: And they have to be correct across the board in order for them to be right that ATF does not have the authority to bring this enforcement action against them. [00:25:56] Speaker 01: Am I correct in assuming I saw the list that council referred to of the wholesale customers? [00:26:02] Speaker 01: Would the state take the position, I assume it would, that all of those distributors, other tribes throughout California, also must be licensed? [00:26:14] Speaker 00: I can't speak to the state's position. [00:26:16] Speaker 00: I mean, what I can say is that the state confirmed as part of the affirmative record that the vast majority of 29 Palms' customers are not licensed or don't have the kind of license that they would need to make the untaxed to sell cigarettes without the stamps. [00:26:34] Speaker 01: I can't speak to sort of the- That has to be true because of the size of the tribe and the volume of [00:26:39] Speaker 01: Cigarettes that we're talking about here. [00:26:40] Speaker 00: I mean they're going somewhere, but they're clearly not being sold at the 29 Palms casino Yes, I think I think that's right I mean I think that that in as it's presented to you in this case 29 Palms has the burden of Proving that all of their sales are law to lawfully operating retailers And and they haven't done that on the record before you I don't think the record would support sort of the [00:27:05] Speaker 01: I'm just not in the record whether... What prompted my question, and I'm not trying to undermine Judge Owen's request because I think mediation might be fruitful if you want to pursue it, but it just strikes me that because of the fact that all these other tribes are not parties to this litigation, this is going to set a precedent as to one tribe in California, even if it's successfully resolved through mediation, [00:27:33] Speaker 01: And what do we do with all the other tribes that are doing exactly the same thing? [00:27:38] Speaker 00: I think if you're concerned about the breadth of the holding and the application to other tribal on reservation retailers that the easiest way to resolve this case, perhaps the narrowest way to resolve this case is to [00:27:50] Speaker 00: Hold that they have not established that the on reservation retailers are lawfully operating Because the record demonstrates that they don't have a license and they haven't provided a reason to conclude that They are sort of otherwise lawfully operating they they haven't right. [00:28:07] Speaker 00: We've I mentioned this in passing, but they're also [00:28:10] Speaker 00: engaging in sales with an unlicensed distributor, which would be unlawful under California state law. [00:28:15] Speaker 00: They're not paying the requisite excise taxes, which would be unlawful under California state law. [00:28:19] Speaker 00: And so I do think that the way that this has come up does present the question of whether they need a license, but the sort of easiest way to resolve this case is to conclude that they have not demonstrated that they are otherwise operating lawfully and would therefore be outside the reach of the PACT Act [00:28:38] Speaker 00: and ATF's enforcement authority. [00:28:39] Speaker 01: Are some of those other customers listed under the PAC Act? [00:28:45] Speaker 00: No, they're not at the moment, as far as I know. [00:28:47] Speaker 00: I mean, I can't speak to what their business model is, but I would suspect that they are, because they're mostly retail shops, engaging in sales to consumers, bringing them outside the reach of ATF's enforcement authority. [00:29:02] Speaker 01: I don't know how many Indian tribes there are in California, but there are a lot. [00:29:05] Speaker 00: Yeah, and I think the point about the sales to consumers being outside the reach of ATF's enforcement authority is important. [00:29:13] Speaker 00: I mean, that most of the retailers, assuming they're selling to consumers as opposed to other retailers or distributors or manufacturers, those would not be delivery sales within the meaning of the statute, and they would not be subject to ATF's enforcement authority. [00:29:30] Speaker 02: Thank you, counsel. [00:29:30] Speaker 00: Thank you. [00:29:35] Speaker 02: Three minutes. [00:29:38] Speaker 03: Thank you, Your Honors. [00:29:40] Speaker 03: I'd like to begin with counsel's suggestion that we're violating the statute and merely asserting some kind of technical or jurisdictional or affirmative defense. [00:29:48] Speaker 03: There's a few words used for that. [00:29:50] Speaker 03: That's not the case. [00:29:51] Speaker 03: The PACT Act is a statute that authorizes [00:29:54] Speaker 03: the federal government to take actions against delivery sellers and so the government has to show that it's acting within its jurisdiction and if we're not a delivery seller because we don't satisfy the statutory decision then we should prevail in this case. [00:30:06] Speaker 03: It's true that council made arguments that were violating state law [00:30:10] Speaker 03: If we agree... [00:30:30] Speaker 01: that the sales are unlawful activity under state law and must be regulated or must comply with state regulations, then would you agree that the decision would not be arbitrary and capricious under the APA to list 29 palms on the PAC Act prohibited seller [00:30:56] Speaker 03: We have a couple of alternative arguments, but it is the case that our primary argument is that 29, excuse me, the Native Nation customers are not acting unlawfully because ATF concluded in. [00:31:06] Speaker 01: I understand that. [00:31:07] Speaker 01: Yes. [00:31:07] Speaker 01: But I'm just, just in terms of the arbitrary and capricious analysis, it is an APA challenge to the listing. [00:31:14] Speaker 01: Is it not? [00:31:15] Speaker 01: Yes. [00:31:15] Speaker 01: The heart of the case. [00:31:16] Speaker 01: That's correct. [00:31:17] Speaker 01: So if the agency, if we agree that the agency could reasonably conclude [00:31:22] Speaker 01: that these were unlawful sales to unlicensed distributors, making them customers, and they got this lengthy letter explaining why ATF believed that, then it would be difficult to conclude that the agency's decision to include them on the list was arbitrary and capricious under the APA. [00:31:43] Speaker 03: I mean, if we lose on all of the legal arguments we're presenting to the court, then we're going to lose the case. [00:31:46] Speaker 03: But, I mean, we have several different alternative legal arguments in the case as to why ATF made errors of law. [00:31:52] Speaker 03: So no, I don't think, I mean, we also have a separate argument, for example, that the discussion of Bracker was incomplete or really non-existent as to the retailer's on-reservation activity. [00:32:02] Speaker 03: So it's true our lead argument concerns the licensing status of on-reservation retailers, but we have a number of back-up arguments as well. [00:32:09] Speaker 03: So I'd just like to leave the court with one word about the licensing requirement. [00:32:13] Speaker 03: It's true that there's a lot of different customers here, but every single one of our customers is an on-reservation tribal retailer. [00:32:19] Speaker 03: So if the court thinks that the state cannot require on-reservation retailers to obtain licenses as a precondition to operating their businesses, then that would necessarily establish that all of our customers are not acting unlawfully because every single one of our customers is an on-reservation retailer. [00:32:34] Speaker 03: And that's what we've been arguing from the start of the case. [00:32:38] Speaker 03: If the panelists have any further questions, my time is up. [00:32:41] Speaker 02: Thank you very much, Council. [00:32:42] Speaker 02: Thanks to both of you who are traveling from Washington, D.C. [00:32:44] Speaker 02: to be here. [00:32:45] Speaker 02: Probably didn't think El Centro was going to be on your travel schedule this year, so we appreciate the efforts you made. [00:32:51] Speaker 02: That's our last case for the day. [00:32:52] Speaker 02: It's submitted. [00:32:53] Speaker 02: And we are going to go back and conference. [00:32:55] Speaker 02: Law clerks will talk to the students. [00:32:58] Speaker 02: And we are adjourned. [00:32:59] Speaker 02: But again, thank you to everyone who made this possible. [00:33:00] Speaker 02: Appreciate it.